* Funding underlines focus on industrial CCS, shift to China
* Campaigners say funding is tiny, given scale of problem
* BHP says fossil fuels will remain part of the energy mix
By Barbara Lewis
BRUSSELS, June 6 (Reuters) - BHP Billiton BHP.AX BLT.L on Monday announced a $7.4 million donation to Peking University to develop technology to capture carbon emissions from the iron and steel industries.
Analysts said the funding marked a shift, as North America has so far led the way in development of carbon capture and storage (CCS) and the focus has been on power plants rather than industrial sector emissions.
BHP Billiton CEO Andrew Mackenzie said capturing carbon and finding industrial uses for it had the potential to be a significant industry for China if it can be proved to be commercially viable.
China, the world's biggest emitter, last December was among the nearly 200 parties that signed up to the first truly global deal on tackling climate change, which sent shares in coal mining firms tumbling. Billiton says it acknowledges the problem of global warming, but that carbon-intensive industry will inevitably increase as the population grows, and that fossil fuel will remain essential for the foreseeable future.
"Debate that centres on making one fossil fuel appear more climate-friendly than another misses the point," Mackenzie said, according to a copy of his speech to Peking University.
BHP Billiton's funding, spread over three years, will support research carried out by the university in collaboration with China's National Centre for Climate Change Strategy. China is the company's biggest customer.
BHP, whose portfolio is strongly weighted towards coal and steel, has already invested in a venture with Canadian power company Saskatchewan Power (SaskPower) SSPOW.UL , which opened the world's first large-scale CCS project at a coal-fired plant in 2014.
For the steel industry, for instance, BHP says there are no immediate alternatives for replacing coking coal, which is an ingredient as well as a fuel source.
Climate campaigners, however, say there should be more emphasis on recycling, and coal can be substituted with gas as the energy source for smelting steel.
Campaign group Bellona said any investment in CCS was critical for a company such as BHP, which has huge coal assets, but the amount pledged was tiny compared with the scale of the problem.
The European Union has been trying to foster CCS for years with little success as firms with limited spending power see no advantage in being the first to work on technology that is only likely to become affordable when developed on a large scale. (Editing by Mark Trevelyan)